In re Discipline of Corey

Decision Date27 March 2012
Docket NumberNo. 20100955.,20100955.
Citation705 Utah Adv. Rep. 40,2012 UT 21,274 P.3d 972
PartiesIn the Matter of the DISCIPLINE OF Clayne I. COREY.
CourtUtah Supreme Court

OPINION TEXT STARTS HERE

Charles A. Gruber, Sandy, for respondent.

Adam C. Bevis, Billy L. Walker, Salt Lake City, for petitioner.

Justice LEE, opinion of the Court:

¶ 1 Clayne Corey used his client's settlement money to cover his firm's operational expenses for four months. After depleting the funds, he tried to persuade his client that she should place her money in a trust account to be distributed in small, monthly installments. After this plan failed, Corey asked his client to sign a promissory note for the outstanding balance, listing his law firm as the borrower. She refused to sign the note and later demanded the remaining balance of what she was owed. Corey failed to repay the already-exhausted funds.

¶ 2 Following a civil suit to recover the missing money, the Office of Professional Conduct (OPC) initiated this disciplinary action. After months of litigation the district court concluded that, based on Corey's lack of intent to injure his client, the presumptive discipline was suspension rather than disbarment. The court suspended Corey but stayed the suspension, finding mitigating evidence and expressing an interest in facilitating restitution to Corey's client. OPC appealed, arguing the presumptive discipline should have been disbarment. We agree and reverse.

I

¶ 3 Law school chums Clayne I. Corey and Randall Lund formed the law firm of Corey & Lund in 1999. In June of that year, Maxine Stager retained Corey & Lund to represent her in a personal injury case. Her fee agreement with the firm provided for a fee of 33.3 percent of any settlement reached. In February 2000, Stager accepted a settlement offer of $122,500.00. Stager received a check from the insurance company that was made out to both her and Corey. Some days later, the entirety of Stager's settlement award was deposited into Corey's operating account instead of his client trust account.

¶ 4 Corey knew that Stager's funds had been deposited into the operating account, but as the exclusive signatory authority on the account he continued to write checks against the balance. Within a matter of weeks the operating account was all but drained, plummeting from a balance of $128,916.14 in February 2000, to only $2,909.12 by the end of June of that year.

¶ 5 In June 2000, Corey began sending monthly payments of $500 to Stager. Later that summer, after the funds had been depleted from the operating account, Corey and Lund arranged a meeting with Stager to discuss a proposed new strategy. To protect both her settlement money and her social security benefits, they suggested that she establish a special needs trust. During this meeting, Corey intimated to Stager that, by preserving her settlement funds in a trust that paid her in monthly installments, she could continue to preserve her right to receive social security insurance benefits. Corey did not take this opportunity, however, to inform Stager that her settlement funds had already been exhausted. Apparently persuaded by the wisdom of protecting her benefits, Stager consented to her funds being placed in a trust.

¶ 6 Although she initially agreed to Corey's proposed trust scheme, Stager never signed any trust documents. No trust was ever established or funded. Some weeks later, at an August 2000 meeting with both Corey and Lund,1 Stager was asked to sign a Promissory Note dated April 20, 2000. The note listed Corey & Lund as the borrower and Stager as the lender for a loan in the amount of $55,173.20 (plus seven percent interest). Stager declined to sign the note.

¶ 7 Eventually Stager requested the full amount of her settlement, including an accounting of the funds and her file. Corey did not produce the funds, the accounting, or Stager's file. Of her settlement funds to that point, Stager had received twenty-one payments of $500 from Corey, totaling $10,500. Corey also paid $20,368.44 toward Stager's medical liens. According to their fee arrangement, Corey was entitled to $40,995.90 of the settlement funds. Stager brought suit against Corey to recover the balance of her settlement money, some $50,371.21, plus interest.

¶ 8 Upon the resolution of that suit, OPC initiated this disciplinary action against Corey in June 2009. After more than a year of litigation, the district court conducted a hearing in September 2010 to determine whether and to what degree to sanction Corey. At the hearing, Corey presented evidence that he had developed a non-cancerous, arachnoid cyst in his brain, which was discovered and removed in June 2009. Although Corey had complained of frequent and severe headaches years earlier in 2001, a CT scan performed at that time revealed no visible cyst, no abnormal fluid collection, and no remarkable variations in ventricle size or configuration. Corey argued that the seeds of the cyst had been sown as early as his childhood and that it had substantially contributed to his misconduct with Stager and other clients.

¶ 9 The district court also heard evidence that between 2001 and 2009, Corey had been diagnosed with anxiety or bipolar disorder and began a regiment of benzodiazepines to treat his symptomatic migraine and tension headaches. In 2008, Corey overdosed on Xanax and as a result began seeing a psychiatric physician, Dr. Jason Lee Anderson. It wasn't until early 2009, when Corey experienced slurred speech and blurred vision, that Dr. Anderson referred him to other specialists for treatment and ordered an MRI, which revealed the one-inch cyst.

¶ 10 Dr. Anderson testified at the sanctions hearing. Among other things, he testified that, in his opinion, the combination of treatment-induced dependency on benzodiazepines and the arachnoid cyst could have contributed to Corey's misconduct. Specifically, Dr. Anderson stated that he believed a cyst in the same location as Corey's could contribute to headaches and mood swings, and that he felt “whatever ... underlying mood disorder [Corey had] ... was exacerbated by the benzodiazepine abuse,” and that “in retrospect [he] believe [d] the cyst was contributory.” During his testimony, however, Dr. Anderson conceded that the brain functions most relevant to Corey's misconduct—concerning organizational skills, cognitive understanding, and the ability to deal with issues—were generally understood to [be] more in the frontal lobe area,” opposite of the location of Corey's cyst.

¶ 11 After the sanctions hearing, the district court made several findings, some centered on the cyst in Corey's brain. The district court found Dr. Anderson's testimony particularly persuasive, concluding that it was both “very credible” and “uncontroverted.” Based on this testimony, the court found that the seeds of the cyst had been “present since before [Corey's] birth,” and that beginning as early as 1993 its presence in the brain affected Corey “in a number of ways,” causing headaches, stress, poor judgment, mood swings, impulsive behavior, and memory problems. With all this in mind, the court found that during his representation of Stager, Corey's treatment-induced dependencies, together with the cyst, causally “contributed to [his] behavior and deviation from the standard of care.”

¶ 12 Given this set of facts, the district court found that Corey had violated five Rules of Professional Conduct during his representation of Stager: 1.15(a) (safekeeping property), 1.15(b) (safekeeping property), 1.15(c) (safekeeping property), 1.16(d) (declining or terminating representation), and 8.4(a) (misconduct). But in light of what it deemed a lack of intent on Corey's part, the court concluded that the presumptive sanction against Corey was suspension rather than disbarment or reprimand.

¶ 13 Contrasting Rules 14–605(a),2 14–605(b)(1),3 and 14–605(c)(1),4 and citing a number of our precedents in this field, 5 the court determined that Corey's was [a]t best ... a case of mixed knowledge and negligence.” Although Corey knew Stager's funds had been deposited into the operating account, was writing checks against that account, and knew or should have known that Stager's funds “were not being kept safe,” the court determined that Corey's “knowledge was not accompanied by the intent that Ms. Stager be deprived of her funds or that [they] be used to personally benefit himself or someone [else].”

¶ 14 In support of the conclusion that suspension was the presumptive discipline, the district court determined that Corey “did not intend to cause harm or injury,” suggesting that the “evidence show[ed] that Corey in fact “intended to protect” Stager by doling out her settlement piecemeal, thereby maintaining the status quo of her SSI benefits. (Emphasis added.) As to Corey's failure to establish a trust or protect Stager's benefits, the court deemed Corey's acts not intentional but “the result of [his] negligence.”

¶ 15 The court noted, moreover, that unlike typical attorney misappropriation cases “there [was] no evidence regarding the fate of Ms. Stager's settlement funds.” Likewise, there was no evidence presented to indicate that Corey “intended to personally benefit” from the funds. Although Corey “likely enjoyed some benefit from the funds” through their use for business expenses, the court concluded that there was no evidence of wrongful intent, a fact that in its view “remove[d] the case from a presumption of disbarment under 14–605(a) to one of suspension under 14–605(b)(1).

¶ 16 With this presumption in mind, the court then considered the aggravating and mitigating factors in the case. Among the aggravating factors, the court noted Corey's long history of misconduct and prior discipline.6 The court also highlighted Corey's “pattern of carelessness relating to the safekeeping of client funds” and the decade of practice he already had under his belt by the time he took on Stager's case. Worst of all, the court determined, was...

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